BIOS

Federal deficits on track to be billions more than forecast: PBO

Andy Blatchford, The Canadian Press
Published Tuesday, December 1, 2015 11:23AM EST

OTTAWA -- Canada's budget watchdog says the federal government's medium-term deficits will likely be billions of dollars higher than what was predicted in "optimistic" Liberal forecasts.

The government is on track to deliver annual shortfalls that will be as much as $10.8 billion higher than expected, the parliamentary budget office said Tuesday.

In the near term, however, the budget office predicted the government to perform better than the projections in Finance Minister Bill Morneau's recent fiscal update.

In fact, the budget office says Ottawa is currently headed for a $1.2-billion surplus this fiscal year -- a $4.2-billion swing from the Liberals' $3-billion shortfall projection for 2015-16.

The report underlined the biggest reasons for the contrasts between the two 2015-16 calculations as "other revenues" and "direct program expenses," which, combined, accounted for $3.9 billion of the difference. It noted the government had yet to release the detailed data for those categories.

"For this reason, PBO cannot assess whether the government's outlook for the 2015-16 budgetary balance is pessimistic," said the report by parliamentary budget officer Jean-Denis Frechette.

In April, the previous Conservative government projected a $2.4-billion surplus for 2015-16 -- including the $1 billion set aside for contingencies.

Some observers have said it could be in the Liberal government's interest to lower expectations and blame their Tory predecessors as a way to deflect future fiscal criticism.

Frechette's report also included a 2016-17 deficit estimate that's $900 million smaller than Ottawa's forecast.

But for the fiscal years between 2017-18 and 2020-21, the budget office warned the federal books are on a trajectory to produce annual shortfalls of $2.3 billion, $3.6 billion, $6.3 billion and $10.8 billion higher than the Liberals' predictions.

Frechette pointed to Ottawa's "more optimistic outlook" for revenues it expects to rake in from personal and corporate income taxes as well as the GST.

"The government's status-quo outlook for the economy and federal budget over the medium term is optimistic," the report said.

"Based on forecast comparisons and forecast revisions, PBO believes that there is downside risk to the government's medium-term outlook."

The fresh projections mean additional pressure on the Liberals to live up to their election vows to keep their expected annual deficits from climbing and to balance the books in four years. The Liberals pledged to boost federal infrastructure spending by billions of dollars as a way to fire up the economy and create jobs.

Both the budget office and government numbers were crunched before factoring in the billions of dollars in election-campaign spending commitments by the Liberals.